Product brand differentiation and dual‐channel store performances of a multi‐channel retailer

Abstract

Purpose – The purpose of this paper is to provide a framework to help business marketers with online and traditional retail channels (multi‐channel retailers) to find the optimal branding strategy and market structure in order to maximize their profits.Design/methodology/approach – A game‐theoretic model is developed to determine the optimal branding strategy and market structure for the dual‐channel stores of a multi‐channel retailer.Findings – The paper demonstrates that an optimal branding strategy and market structure exists for the dual‐channel stores of a multi‐channel retailer. When a retailer uses multiple channels in parallel to sell its product, the optimal branding strategy is to employ as large as possible brand differentiation between the dual‐channel stores, particularly when the price is less sensitive for consumers and the market base size is larger. Furthermore, it is also found that the optimal market structure is the Stackelberg mode, especially when the product brands between the two c...